Correlation Between Ares Management and Japan Asia
Can any of the company-specific risk be diversified away by investing in both Ares Management and Japan Asia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ares Management and Japan Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Management Corp and Japan Asia Investment, you can compare the effects of market volatilities on Ares Management and Japan Asia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ares Management with a short position of Japan Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Management and Japan Asia.
Diversification Opportunities for Ares Management and Japan Asia
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ares and Japan is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and Japan Asia Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Asia Investment and Ares Management is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ares Management Corp are associated (or correlated) with Japan Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Asia Investment has no effect on the direction of Ares Management i.e., Ares Management and Japan Asia go up and down completely randomly.
Pair Corralation between Ares Management and Japan Asia
Assuming the 90 days horizon Ares Management Corp is expected to generate 0.58 times more return on investment than Japan Asia. However, Ares Management Corp is 1.72 times less risky than Japan Asia. It trades about 0.12 of its potential returns per unit of risk. Japan Asia Investment is currently generating about 0.0 per unit of risk. If you would invest 6,205 in Ares Management Corp on August 30, 2024 and sell it today you would earn a total of 10,649 from holding Ares Management Corp or generate 171.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ares Management Corp vs. Japan Asia Investment
Performance |
| Timeline |
| Ares Management Corp |
| Japan Asia Investment |
Ares Management and Japan Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Management and Japan Asia
The main advantage of trading using opposite Ares Management and Japan Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management position performs unexpectedly, Japan Asia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Japan Asia will offset losses from the drop in Japan Asia's long position.The idea behind Ares Management Corp and Japan Asia Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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